Gay marriage may shrink deficit

The good news for the federal government: Same-sex marriage might actually be good for the deficit.

The Supreme Court has made it easier for some same-sex couples to get Social Security benefits, but its spending won’t go up a lot. And everything else that happens to social programs cuts the other way — so the bottom line is that the deficit could actually go down a bit.

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Here’s what the decision means for the government:

A slightly smaller deficit

The last time the Congressional Budget Office looked at the issue was a while ago – the most recent estimate was done in 2004. But it’s still the study that’s most widely used by researchers, and it concluded that legalizing same-sex marriage would reduce the deficit by a little less than $1 billion a year.

That was under a more sweeping scenario, though – the budget office looked at what would happen if all 50 states would legalize same-sex marriage. Instead, today’s decision only has an immediate impact on the 12 states where same-sex marriage is already legal or will be soon, and on couples who were legally married in other states but now live in places where their marriages aren’t recognized.

More tax revenues

The various tax impacts cut different ways, but the bottom line is that the federal government will get a bit more in tax revenues, according to the best estimates.

In 2004, CBO found that tax revenues would have increased by less than $400 million a year between 2005 and 2010, and then climbed by $500 million to $700 million a year after the George W. Bush tax cuts expired.

CBO hasn’t updated that estimate since then, and there’s a lot of uncertainty about what would happen today. The Bush tax cuts have now been extended (except for families earning more than $450,000).

But Roberton Williams of the Urban Institute, a former CBO analyst who worked on the tax portion of that report, says there have been a lot of other changes, too – the economy has gotten worse, and Obama’s middle-class tax cuts and Obamacare would affect people’s tax decisions.

The only thing that’s safe to say, Williams said, is that the revenue gain from same-sex marriage won’t be “large enough to make a noticeable difference in the federal deficit.”

A more recent estimate, published last year by Adam Stevenson of the University of Michigan, suggests that the revenue gains to the federal government would be a lot smaller — about $34 million a year. The difference, Stevenson says, is that he includes all the recent tax changes, which would shrink the amount of taxes the government would collect.

But Stevenson also assumes a change that would work the other way: If one partner in a same-sex couple works more, the other partner will work more too, so their taxable income would be higher.

So go ahead – call it the Supreme Court tax hike. It’s small and the justices won’t care anyway. They’ve got jobs for life.

A bit more Social Security spending

The decision isn’t going to have a big impact on Social Security, but it is going to increase its spending slightly, because same-sex couples will now be able to get some benefits they couldn’t get before.

One of them is the spouse benefit. They can get half of the other person’s Social Security payment – or, if they’ve worked themselves, the couple will get the larger of the two benefits. The other is the survivor’s benefit, which a married person can get after the spouse dies.

The 2004 CBO study found that the impact would be a drop in the bucket, in Social Security terms — $50 million in extra benefits in 2005, growing to $350 million in 2014.

Kathy Ruffing, who worked on that part of the CBO study and is now at the Center for Budget and Policy Priorities, says the number of people in same-sex partnerships could have changed since then, but the bottom line for Social Security is probably about the same because the program hasn’t changed.

But that estimate assumed same-sex marriage would become legal in all 50 states, she said, which isn’t the case now – although more states could legalize it after today’s ruling.

Less spending on low-income programs

It works the other way, though, with the range of social programs that are aimed at low-income people – because same-sex couples’ joint incomes will be higher than their single incomes if they get married.

So if it’s an elderly couple getting help paying for their Medicare prescription drugs, for example, they may be less likely to qualify for it if they’re married and their incomes go up. That means Medicare would save a bit of money, though not a lot – CBO guessed $50 million a year in the old estimate.

The bigger savings would come to Medicaid, the health care program for low-income people, and Supplemental Security Income, which gives financial help to the low-income elderly and people with disabilities. In the 2004 estimate, CBO said Medicaid could save about $400 million and SSI could save $100 million.

The one exception: Medicaid also helps people pay for nursing-home care, and if same-sex couples get married, they’ll be able to protect more of their assets. That means they won’t have to pay as much out of their own pockets.

Obamacare: It cuts both ways

If you just look at Obamacare by itself, the federal government will probably save money if more same-sex couples get married. That’s for the same reason the spending on the low-income programs goes down: The government doesn’t have to provide as much financial help if their incomes go up.

With Obamacare, the main source of aid is the tax credits that will help people pay for health coverage starting next year. And it’s not just for low-income people: There will be some help available even to those who earn up to 400 percent of the federal poverty level, which is about $62,000 for a two-person household this year.

So same-sex couples will be able to get more help paying their premiums if they apply individually rather than as married couples. If they’re married, they probably won’t get the subsidies as easily — so Obamacare’s costs will go down.

But that’s not the end of the story for the government. It’s likely to lose money on health insurance tax breaks — because married same-sex couples will also be able to get health coverage through the workplace more easily.

That’s why, overall, health analysts believe the higher cost of the health insurance tax breaks will more or less cancel out the lower spending on Obamacare.

Married same-sex couples might also learn about a catch in the Obamacare rules: Families can’t get the subsidies if the main worker can get an “affordable” health plan through the workplace – and according to IRS rules, it only has to be affordable to the worker, not to the whole family.

That’s another reason that, once a couple gets married, they may find it harder to get Obamacare help than it would have been if they had stayed single.